Speaking with UK-based financial magazine, Money Week, famed Swiss investment manager Marc Faber said America needs to experience “a devastating crisis” before real growth and jobs can be created.
Foretelling the inevitable burst in debt several years before the collapse of Bear Stearns, Faber’s has gained a reputation as someone who is able to spot the effects of years of mal-investment within the U.S. (and globally), dispassionately, while others cannot, or won’t.
As today’s disciple of the Austrian School’s Karl Menger, Ludwig von Mises, and Friedrich Hayek, Faber’s track record of “getting it right” has amassed him a huge following of investors grown weary of the 1984-like communications and deceptive practices of the U.S. government and its financier cohort, the U.S. Federal Reserve.
Faber’s forecasting record and delivery style on the deteriorating state of the U.S. has taken on a air akin to the counterculture revolutionaries of the 1960s but with a viewpoint more focused on financial and economics matters—ironically, maybe, directed to the same a demographic most affected due to inability to recover in time for retirement—the Babyboomer. Faber, himself, is 65-years-old—another Babyboomer who still sports a ponytail and distrusts those in authority to take selfless actions for the sake of the greater good.
Faber told Money Week that the debt hasn’t gone away in the U.S. Instead, it’s grown much larger but shifted into the form of public debt and away from the ones who created the original oversized debt load in the first place. And the only way out of a default (either outright, or through inflation) is “to impose a flat tax and cut government expenditures by 50%.” But only a financial catastrophe would affect those cures, he said.
The consequences of attempting to solve a U.S. solvency crisis with ever more debt from Treasury and the Fed doesn’t have Faber chanting the “king dollar” mantra on public airways to millions of U.S. viewers each day on programming outlets such as CNBC.
He points out that in dollar terms, the rebound in the S&P from the March 2009 low appears to some investors that an economic rebound in the second half of 2011 and 2012 is expected. But when the S&P is priced in other currencies, such as the Swiss franc, Australian dollar, Japanese yen, as well as the monetary metals, gold or silver, equities have dropped from 50% to 80% since the market peak of 2007, he said.
Of the various forms of protection from future dollar declines, gold is his favorite. Gold (and silver) doesn’t have a constituency to placate, especially as it relates to the U.S. dollar.
“Not to own gold is to trust the value of paper money and the government’s integrity,” said Faber. “No one in his right mind could trust the U.S. government any more.”
And finally, Faber shrugs off the talk of a gold bubble. He insists that the bubble is NOT in the gold market.
He said the world is, instead, “grossly underweight gold” but “flooded with U.S. dollars.”